Note: We updated this post (originally posted last week) to add a new frequently asked question about expanded hyperlinking.
The questions and answers below address certain interpretive issues on the SEC’s new hyperlink requirements effective May 2, 2019. For more on the SEC’s amendments, see our previous post that details the rule changes.
Question: The new rules will require registrants to include an active hyperlink to information incorporated by reference into a registration statement or report if such information is publicly available on EDGAR “at the time the registration statement or form is filed.”
How does this new requirement apply to information incorporated by reference from one item to another within the same filing?
For example, is a hyperlink required if the registrant includes a sentence in Item 1.01 of Form 8-K that incorporates by reference the full text of the agreement filed as an exhibit under Item 9.01 of Form 8-K in the same filing? Or is a hyperlink required if the registrant in the legal proceedings item in Form 10-Q incorporates by reference the litigation disclosures in the contingencies footnote in the financial statements?
Answer: A hyperlink would not be required in the above examples. The SEC staff has provided informal interpretive guidance that they believe it is reasonable for registrants to interpret the phrase “at the time the registration statement or form is filed” to mean that such information would need to be on EDGAR prior to the time the registration statement or form is filed.
In other words, an active hyperlink would not be required by the new rules if such hyperlink would be to information within the same filing. The SEC Staff noted that companies are permitted, if technically feasible, to include such hyperlinks to information within the same filing, but that they do not view the rule as requiring this.
Question #2: How does the new hyperlinking requirement apply to the common situation in which the registrant cross-references the reader to other information that is contained either within the same filing or in a prior filing, without explicitly incorporating the information by reference?
For example, is a hyperlink required if the registrant in the legal proceedings item in Form 10-Q says that no material updates have occurred since the last Form 10-K and cross-references the reader to such prior disclosure, without explicitly incorporating the information by reference?
Answer #2: Based on a review of the rules as well as the SEC’s adopting release, we believe it is reasonable to conclude that a “cross-reference” to other information, whether in the same or prior filing, should not be treated the same as the disclosure by a registrant that such other information is “incorporated by reference.”
This view is supported by the language in the new rules where incorporation by reference and cross-referencing are mentioned separately. For example, new Rule 12b-23(b) states, “In the financial statements, incorporating by reference, or cross-referencing to, information outside of the financial statements is not permitted unless otherwise specifically permitted or required by the Commission’s rules or by U.S. Generally Accepted Accounting Principles or International Financial Reporting Standards as issued by the International Accounting Standards Board, whichever is applicable.” (emphasis added)
The phrase “or cross-referencing to” demonstrates that the SEC views incorporating by reference and cross-referencing differently. In contrast, Rule 12b-23(d), which is the operative rule related to hyperlinking in the Form 10-Q context, omits any reference to cross-referencing. Rule 12b-23(d) states, “You must include an active hyperlink to information incorporated into a registration statement or report by reference if such information is publicly available on the Commission’s Electronic Data Gathering, Analysis and Retrieval System (”EDGAR”) at the time the registration statement or form is filed.”
Therefore, unless the registrant specifically incorporates by reference the information (perhaps even using that language explicitly), we believe it is reasonable to conclude that a hyperlink is not required by the new rules.